Independent audit gives Coatesville Area School District an unmodified opinion; finance committee moves acceptance to full board

Chris Herr, a partner with Maly (independent auditors), told the Coatesville Area School District finance committee on March 11 that the auditors issued an unmodified opinion on the district's financial statements for the year ended June 30, 2024. "Our opinion on the financial statements... is an unmodified opinion on the financial statements. What that means is they're free of any material misstatement," Herr said.

The audit team reported no instances of noncompliance disclosed during the audit, no current-year findings and no significant deficiencies or material weaknesses in internal control. The auditors also issued an unmodified opinion on compliance for the federal major program tested, Title I. Herr said the district continues to be classified as a lower-risk auditee and that federal reports were filed timely.

The finance committee chair, Liz Muirhead, asked for questions after the presentation and the committee voted to move acceptance of the independent audit to the full board agenda. At the meeting Pam Keeley and the district business office were publicly thanked for their work preparing materials for the audit.

Why it matters: an unmodified (clean) audit opinion signals that the district's financial statements are materially correct under generally accepted accounting principles (GAAP) and applicable Governmental Accounting Standards Board (GASB) guidance. Committee members and administrators noted the clean report while also pointing to long-term budget pressures cited elsewhere in the presentation, including charter tuition and pension costs.

Key points from the audit presentation: - Total capital asset cost: about $594,000,000, up roughly $17,500,000 from the prior year largely from roofing and HVAC projects. Depreciation expense for the year was about $10,000,000; accumulated depreciation about $146,000,000. Herr said accumulated depreciation is about 50% of cost, "right in the norm" compared with similar districts. - Net pension liability: the district's share of the state pension plan remained largely unchanged year to year; Herr described state-level net pension liability trends and noted the presentation uses a one-year look-back to state plan data. - Revenue and expenses: total revenue rose from roughly $212,000,000 to $231,000,000 year over year. Local revenue was the largest source and increased by about $15,000,000 (about $10,000,000 of that from higher real-estate tax receipts and some previously escrowed hospital amounts recognized). Instruction expenses increased from about $143,000,000 to $151,000,000; charter school tuition and special-education costs were cited as upward pressures. - Fund balance: general fund unassigned fund balance ended the year at about $33,000,000, roughly 15% of annual expenses (approximately 1.8 months of expenditures); the auditor noted the district is approaching the lower end of frequently recommended reserves (two to three months).

Public comment and committee discussion during the finance meeting touched on related transparency issues. In public comment, a resident asked whether certain legal bills listed as "claims and judgments" were included in the legal-fees summary and requested greater clarity on items labeled "student issues." Committee members asked the auditor technical questions about pension volatility and the management discussion and analysis; Herr clarified which portions of the management discussion are prepared by district management and which are audited.

The finance committee recorded a committee-level vote to move the independent audit acceptance to the full board agenda; the committee vote was taken by voice and passed.

Looking ahead: the audit and its accompanying SAS-114 letter (communication of audit matters) were provided to the district; the auditors said the letter notes standard significant-risk considerations (management override, improper revenue recognition) that are disclosed as part of audit standards and not because of district-specific wrongdoing. The audit results and the SAS-114 letter will appear on the full board agenda for formal acceptance.